Thursday, June 10, 2010

Consumer confidence is plummeting with the latest slide - the third in three months - blamed in part on the budget and the proposed resource super profits tax.

As high as 117 in March the Westpac Melbourne Institute index is now just 101.9 on a scale where 100 means pessimists balance optimists.

"While the fall in May was largely due to the Reserve Bank’s decision to raise rates that month, the fall in June seems to reflect a mixture of concerns about deteriorating conditions abroad, financial market turmoil and uncertainty around the proposed resource tax," said Westpac economist Matthew Hassan.

Westpac found the most recalled news items during the month concerned the budget and tax. The perception was negative with the number of people feeling bad about the news outweighing the number who felt good.

But their were very sharp differences according to the way people vote...
The survey found Australians planning to vote Labor feel the most confident of any deomographic group with an index number of 120, meaning optimists outweigh pessimists 20 per cent.

Australians planning to vote for the Coalition feel the least confident of with an index number of 90, meaning pessimists outweigh optimists by 10 per cent.

The gap between the confidence of Labor and Coalition voters is amongst the widest on record.

Australians are now far less likely to believe that now is a good time to buy a house than at any time since the depths of the financial crisis with the balance of optimists versus pessimists sliding from 146 to 95 in a year.

"We are reigning in our exuberance," said CommSec economist Savanth Sebastian. "We are now barely more confident that a year ago and the slide in the share market hasn't helped."

Separately released figures show home loans sliding for the ninth time in ten months with the number of loans to owner occupiers falling to its lowest point in almost a decade.

Just 46,300 Australians borrowed to buy houses in April, down from a recent high of 64,600 in September.

In NSW loan approvals were down 30 per cent on September. Nationwide approvals were down 28 per cent.

Against that trend investment loans are climbing and are now 26 per cent higher than a year ago.

Concerns about share prices and international conditions are weighing heavily on consumers with only 11 per cent believing the share market is "the wisest place for savings" and the assessment of overseas conditions the worst since the financial crisis.

"The proportion of Australians recalling international news is actually higher than in the crisis," said Mr Hassan. "It's the highest since the Asian economic crisis of 1997 and 1998."

Overwhelmingly Australians believe the bank is the safest place for savings with real estate and paying down debt the next highest categories.

Surprisingly for Australians who are increasingly negative, the proportion of people believing that "now is a good time to buy a major household item" high with 58 per cent answering yes and only 28 per cent answering no.

Optimists about buying cars also far outweighed pessimists, possibly reflecting good car prices flowing from the cut in tariffs in January and the recently high Australian dollar.